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 / Winter 2003 / Issue 33(originally published by Booz & Company)


GE’s Next Workout

The industrial giant’s legendary learning center, Crotonville, has a new assignment: Teach every manager to be a strategist.

Illustration by Lars Leetaru
You wouldn’t expect to be able to predict the overall strategic direction of most companies by studying their executive training facilities. But ever since the 1950s, General Electric Company has tended to move in the direction set by Crotonville (or, to use its full name, the John F. Welch Leadership Development Center at Crotonville, N.Y.). GE’s lush hotel-and-classroom center overlooking the Hudson is where generations of GE executives have come to learn management and leadership techniques inspired by GE leaders.

GE CEO Ralph Cordiner (with the help of Peter Drucker) established a new wave of scientific management after World War II, in which every detail of management work, down to the placement of pens on desks, was spelled out in elaborate “blue books.” Then in the 1980s, GE CEO Jack Welch launched Work-Out, the company’s infamous bureaucracy-busting productivity initiative, an attack on
scientific management demanding that executives shun rote rules and become candid, fast on their feet, and flexible. Despite their differences, Mr. Cordiner and Mr. Welch held the same core idea about organizational change: The only way to shift a company’s culture is to change the habitual thinking and behavior of its fast-track executives.

Right now, GE is making another full-scale effort (unhidden but also unflaunted) to change the way executives think and behave. Under Jeffrey Immelt, who became chief executive two years ago, executives at Crotonville are studying future technology, corporate social responsibility, system dynamics, and long-range planning. The purpose is to systematically build the capabilities of managers throughout the company — capabilities that enhance strategic thinking and cut down on bureaucratic decision making.

In other words, GE wants smart managers at many levels to be able to make the kind of strategic judgments and bets on bold new projects that would have been made by only the most senior executives in the past.

“All the way through the 1980s and 1990s, Welch focused on taking the fat out of the system, on making tough decisions, on productivity, and on bottom-line growth,” says Bob Corcoran, the current director of Crotonville (and a long-standing HR manager before that at GE Medical Systems, the business that Mr. Immelt ran before becoming CEO). “Jeff inherited a company skilled at execution — one that can stop on a dime and deliver results. The company just loves to execute. Now the question is how to develop the top line.”

Mr. Corcoran doesn’t mean “top line” in the ordinary managerial sense of increased revenue. He means new products, markets, and lines of business, particularly ones that require long-term investment and technological innovation, where few can match GE’s capabilities. To accomplish that shift, GE is drawing on its own extensive history with management innovation, particularly with Work-Out, which began 15 years ago as a vehicle for improving productivity and developed into a widely felt mechanism for cultural change. If this ambitious initiative works, GE’s current leaders could return the company to its roots, as a major force in the creation of new technological infrastructures like the electric power grid and the radio broadcast systems it pioneered. And if history is any guide, wherever GE takes management education, much of the rest of corporate America is likely to follow.

No Consolation Prize
People inside and outside GE consider the Work-Out program to be perhaps the single most vital part of the Welch “revolution” — the component that made Mr. Welch’s ideas comprehensible and palatable to people throughout the company. Many of the external consultants who helped design and deliver Work-Out — including such well-known academics as Noel Tichy and David Ulrich at the University of Michigan and Harvard’s Todd Jick, as well as management authors such as Steven Kerr, currently the chief learning officer at the Goldman Sachs Group Inc. — have essentially based their consulting practice on Work-Out. The GE Work-Out: How to Implement GE’s Revolutionary Method for Busting Bureaucracy and Attacking Organizational Problems —Fast! (McGraw-Hill, 2002), by Dr. Ulrich, Mr. Kerr, and consultant Ron Ashkenas, is only one of several guides in print. The corporate change cognoscenti whom I know agree with Jim Baughman, the Work-Out architect who was a Harvard Business School professor before becoming the first head of Crotonville under Mr. Welch: “It’s the most successful program I saw in 40 years of practice.”

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